Ukraine Government Duped by Conman

By now, everyone in the world knows about the Yanukovych regime’s embarrassing non-deal with Spain’s Gas Natural Fenosa utility company. On November 26th, Vladyslav Kaskiv, the director of the Ukrainian state investment agency, and a man he believed to be Fenosa’s plenipotentiary, one Jordi Sarda Bonvehi, signed a document committing Fenosa to participate in a $1 billion project to build a liquefied natural gas plant near Odessa. The signing took place amid much fanfare and in the presence of a beaming Prime Minister Mykola Azarov and Energy Minister Yuri Boyko.

Almost immediately after the TV cameras stopped rolling, Fenosa denied that Sarda Bonvehi was empowered to sign anything on its behalf. In a word, the Yanukovych regime’s top policy makers had agreed to a deal with an imposter. The Ukrainian press had a field day. Even theNew York Times and other international news outlets got in on the act.

Much of the reporting has focused on the imposter, but he’s not the story. The real story is how the Yanukovych regime could not have known that it was conducting negotiations with a conman. “We never doubted he was authentic,” is how the hapless Kaskiv put it to the Times. He could just as well have said: “We were suckers.”

There are four possible explanations for the scandal.

First, the Yanukovych regime in general and the Regionnaires in particular are not known for their high IQs. If you’re dumb—an adjective that I’ve used with wild abandon in describing these guys—that dumbness will resonate throughout everything you do. From this point of view, the non-deal with Fenosa shouldn’t surprise us: it’s the norm, and not the deviation from the norm. Why engage in something as obvious as due diligence and check this guy’s background or, at the least, ask to see his business card or, heaven forbid, even place a phone call to Fenosa? Heck, if he has a Spanish accent, he must be for real, right?

Second, it’s possible that some agency actually checked Sarda Bonhevi’s background and knew that he’s an imposter, but either forgot to tell Kaskiv or sent a memo that got lost in the shuffle. In other words, the culprit would be Regionnaire incompetence and bureaucratic fragmentation. Despite Regionnaire claims of being professionals, the fact is that these fellas are deeply provincial politicians who are masters at theft and boobs at policy. They couldn’t make the trains run on time even if the trains ran on time. By the same token, the over-centralization of the vast power in President Yanukovych’s less-than-professional hands has, not unexpectedly, compartmentalized and fragmented the government bureaucracy and made it difficult for its various agencies, which are focused on following orders from the sultan, to communicate and cooperate laterally. Yanukovych thinks that, if he runs everything, everyone will do what he tells them to do. In reality, they will do nothing except wait to be told to do something.

Third, it’s perfectly possible that other agencies knew exactly who Sarda Bonvehi was, but decided not to tell Kaskiv, Azarov, and Boyko. Authoritarian regimes are always rent by savage intra-elite competitions for the boss man’s favors and the culprit could be some minister, oligarch, or clan out to get the prime minister. If so, such cutthroat infighting could mean that the Regionnaire elite is cracking up.

Fourth, the fact that the scandal is also a major embarrassment for the entire Yanukovych regime and undermines its efforts to search for alternatives to Russian gas suggests that Russia’s Gazprom or security service might have been involved. After all, what right-minded foreign investor would be willing to talk to the clowns running the Ukrainian energy sector after a scandal of such incomprehensible magnitude?

The Yanukovych regime’s main oversight was, of course, never to have called me. I’ve got tons of friends and all of them are empowered to sign major deals. There’s this guy I know in Bensonhurst who’d be willing to sell Kaskiv the Verrazano Bridge for a song. My pal Hans in Vienna could get ’em a great deal for the Ringstrasse. And Big Lou has been looking for a buyer for the Paris Metro for years.